Obligation to Award After the Notification of a Preliminary Award Decision?
A discussion of the judgment of the Court of The Hague in
Preliminary Relief Proceedings dated 4 August 2008 (LJN:
BD9379).
The key question in these proceedings is whether the municipality
of The Hague has the right to withdraw the procurement procedure
after having notified the bidders of its award
decision.
The Facts
The municipality of The Hague organized a European procurement
procedure. The contract concerned the supply of approximately eight
million red paving bricks in and around the municipality of The
Hague. The supply would take place on call and in partial
deliveries during a period of one year, with the possibility to
extend this period twice with one year. The award criterion was the
lowest price.
The procurement procedure took place on 29 April 2008. On this
date five parties supplied a specimen, after which two potential
bidders dropped out. Following this the three selected bidders
submitted a bid. The lowest bidder was De Bylandt.
In a letter dated 26 May 2008 the municipality informed De
Bylandt of its intention to award it the contract. One of the other
bidders objected against this award decision by instituting
preliminary relief proceedings.
A couple of weeks later, on 20 June 2008, the municipality
informed De Bylandt in writing that it would not carry out its
intention to award the contract to De Bylandt. The reason for
breaking off the procurement procedure was the administrative
decision of the municipality of The Hague to suspend the new
organization structure for the purchase of materials - which would
be carried out centrally from then on - for an indefinite period of
time. According to the municipality, as a result of this decision
the starting points of the procurement procedure were cancelled.
This was the reason why the municipality would not give the
contract. In this letter the municipality already announced that it
would once again invite bids for the modified contract.
De Bylandt objected against this decision of the municipality
and claimed in preliminary relief proceedings, in summary, that the
municipality be ordered to execute its intention to award the
contract to De Bylandt and be prohibited from proceeding to
re-invite bids for the contract. In this respect De Bylandt took
the position that it had not been proven that the contract could
not be awarded in a legally valid manner. No irregularities had
come to light in the procedure, and the suspension of the
organization structure by the municipality of the Hague would not
lead to a material change in the specifications of the contract
either.
Court of The Hague in Preliminary Relief
Proceedings
The Court first and foremost held that in principle a
contracting authority is free to break off a current procurement
procedure and to initiate a new procurement procedure.
Subsequently, the Court commented that this might be different if
the procurement procedure has reached the awarding phase. In that
case the contracting authority would have taken note of the bids,
as a result of which the principle of equality and the principle of
legitimate expectations as well as the precontractual good faith
could stand in the way of a re-inviting of bids. According to the
Court this is the case if one or more suitable offers have been
made and there is no question of a material change in the
specifications of the contract in the intended re-inviting of
bids.
The Court considered that the municipality of The Hague has not
made it plausible that the suspension of the new organization
structure must lead to a material change in the specifications of
the contract. According to the Court, the total need for red bricks
of the municipality of The Hague remains unchanged, just like the
technical requirements that are set on bricks. The consequences of
the suspension of the new structure for the actual performance of
the contract are relatively limited. For these reasons the Court
ruled that the municipality of The Hague has reconsidered its
intention to award on incorrect
grounds.
Comments
In this judgment the Court wrongfully involved the question of
whether in the event of a possible re-inviting of bids there is a
material change of the contract. Thus, the Court ignored that a
contracting authority is free at all times to break off a
procurement procedure, irrespective of the stage that the procedure
has reached. There is no question of an obligation to award, not
even if the procurement procedure has reached the final stage and
the contracting authority has announced its intention to award to
the bidders. This follows from the principle of contractual freedom
and is established case law of the European Court of Justice.
However, a contracting authority is obliged to communicate the
reasons for its decision to withdraw the procurement procedure. The
grounds for the decision must allow the bidders to verify whether
the contracting authority has not violated any general principles
of procurement law with this decision. Actually, this means that
the grounds for the decision of the contracting authority must be
sufficient to allow the bidders to assess whether the assumptions
on which the decision not to proceed to award is based are
defensible.
The question of whether there is a material change of the
contract is not relevant at this stage. This question will only be
discussed if the municipality of The Hague actually decides to
re-invite bids for the contract. The original contract may not be
marketed once again just like that; there must be a material change
in the specifications of the contract.